Franklin Electric Reports Record Third Quarter 2019 Sales and Earnings

27.11.2019
Franklin Electric reported record third quarter 2019 GAAP fully diluted earnings per share (EPS) of $0.72, versus a GAAP fully diluted EPS in the third quarter 2018 of $0.63. Third quarter 2019 sales were a record $348.4 million, compared to 2018 third quarter sales of $341.9 million.

Third quarter EPS before the impact of restructuring expenses was also a record at $0.73 compared to 2018 third quarter EPS before restructuring of $0.64 (see table below for a reconciliation of GAAP EPS to EPS before restructuring).

Gregg Sengstack, Franklin Electric’s Chairman and Chief Executive Officer, commented: “Our third quarter earnings were a record for any third quarter in the Company’s history. Our earnings per share grew by 14 percent from the third quarter 2018. Our improvement in earnings was led by our Distribution segment which grew operating income by over 70 percent as a result of more favorable weather conditions in much of the United States and acquisitions. Our free cash flow after capital expenditures is about 65 percent higher through the first three quarters of the year versus the same period of 2018. Despite these earnings and cash generation improvements, organic sales growth was below expectations in our Water and Fueling systems businesses.”

Water Systems
Water Systems sales were $199.8 million in the third quarter 2019, versus the third quarter 2018 sales of $199.3 million. In the third quarter of 2019, sales from businesses acquired since the third quarter of 2018 were $2.3 million. Water Systems sales decreased 2 percent in the quarter due to foreign currency translation. Water Systems organic sales were higher by 2 percent compared to the third quarter of 2018.

Water Systems sales in the U.S. and Canada increased by 1 percent overall compared to the third quarter 2018, primarily related to sales from acquisitions. Sales of dewatering equipment increased by 2 percent on the continued diversification of product sales and channels. Sales of groundwater pumping equipment increased by 1 percent versus the third quarter 2018. The increase in groundwater pumping systems was primarily due to improved weather conditions in North America and increased sales to the Company’s Headwater Distribution segment. Sales of surface pumping equipment decreased by 4 percent on lower sales of both wastewater and condensation removal equipment.

Water Systems sales in markets outside the U.S. and Canada declined by 1 percent overall. Foreign currency translation decreased sales by 5 percent. Outside the U.S. and Canada, Water Systems organic sales increased by 4 percent, primarily driven by higher sales in Latin America and Europe, Middle East and Africa markets, partially offset by sales declines in Asia Pacific.

Water Systems operating income was $28.4 million in the third quarter 2019, compared to $28.4 million in the third quarter 2018.

Fueling Systems
Fueling Systems sales were $78.1 million in the third quarter 2019 compared to third quarter 2018 sales of $77.8 million and were a record for any third quarter. Fueling Systems sales decreased 1 percent in the quarter due to foreign currency translation. Fueling Systems organic sales increased 2 percent compared to the third quarter of 2018.

Fueling Systems sales in the U.S. and Canada increased by 10 percent compared to the third quarter 2018. The increase was principally in the fuel management systems and service station hardware product lines. Outside the U.S. and Canada, Fueling Systems revenues declined by 6 percent, primarily due to lower sales in China.

Fueling Systems operating income was a record for any third quarter at $21.6 million compared to $20.9 million in the third quarter of 2018. Fueling Systems operating income was higher in the quarter due to favorable product sales mix.

Distribution
Distribution sales were $87.0 million in the third quarter 2019, versus third quarter 2018 sales of $78.0 million. In the third quarter of 2019, sales from businesses acquired since the third quarter of 2018 were $7.3 million. The Distribution segment organic sales increased 2 percent compared to the third quarter of 2018.

The Distribution segment operating income was $5.9 million in the third quarter of 2019, compared to $3.1 million in the third quarter of 2018. Distribution’s operating income was higher in the third quarter due to higher sales volumes and acquisitions and leverage on operating expenses.

Overall
The Company’s consolidated gross profit was $117.6 million for the third quarter of 2019, an increase from the third quarter of 2018 gross profit of $113.0 million. The gross profit increase was primarily due to higher Fueling Systems and Distribution sales. The gross profit as a percent of net sales was 33.8 percent in the third quarter of 2019 versus 33.0 percent in the third quarter of 2018.

Selling, general, and administrative (SG&A) expenses were $74.5 million in the third quarter of 2019 compared to $72.5 million in the third quarter of 2018. SG&A expenses from acquired businesses was $1.5 million and excluding the acquired entities, the Company’s SG&A expenses in the third quarter of 2019 were $73.0 million, an increase of less than 1 percent from the third quarter 2018, partially due to the offsetting effect of foreign currency translation versus the prior year.

Commenting on the outlook for the remainder of 2019, Mr. Sengstack said: “Based on our third quarter results and our current view of our end markets, we expect our fourth quarter to be similar to last year in both revenue and earnings. This would result in full year 2019 earnings per share before restructuring at the low end of our current guidance.”

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